V. G. OAK, J. - These four connected writ petitions are directed against a proceeding under section 132 of the Income-tax Act, 1961 (here-after referred to as the Act). The same questions of law have been raised in the four cases. Most of the facts are common. It will, therefore, be convenient to dispose of the four writ petitions by a common judgment.
At Meerut there is a firm under the name and style 'Seth Brothers.' The firm has been in existence for several years. Its constitution has been changed from time to time. The firm was reconstituted with effect from April 2, 1957. There are at present six partners in the firm. It has been assessed to income-tax. Assessment proceedings for the years 1960-61, 1961-62 and 1962-63 are pending before the Income-tax Officer, D-Ward, Meerut. The Commissioner of Income-tax, U. P., Lucknow, received reports to the effect that the firm has been evading payment of income-tax. He, therefore, decided to get the premises of the firm searched for obtaining documents which would be useful for assessment of income-tax. On May 29, 1963, letters of authorization were issued in favour of the Income-tax Officer searched the premises of M/s. Seth Brothers (Shanti Niketan, Civil Lines, Meerut) on the 7th and the 8th of June, 1963. The two officers seized a large number of documents from these premises. The documents so recovered included documents belonging to M/s. Seth Brothers and also documents belonging to three other associated business concerns. Since then, these documents have been in the custody of the income-tax authorities. These connected writ petitions are directed against those proceedings dated the 7th and the 8th of June, 1963. According to the petitioners, the documents were unlawfully seized from their possession.
Civil Miscellaneous Writ No. 3302 of 1963 is the leading case. M/s. Seth Brothers are the petitioners in the case. Nath Brothers Private Limited is a private limited company. It is the petitioner in Writ No. 3380 of 1963. Seth Brothers Private Limited is another private limited company. It is the petitioner in Writ No. 3381 of 1963. M/s. Seth Brothers, Meerut, running Cold Storage at Chhiramau district, Farrukhabad, and at Patna, are a firm registered under the Indian Partnership Act. It is the petitioner in Writ No. 3382 of 1963. Documents belonging to these four business concerns have been seized by the income-tax authorities.
The learned counsel for the petitioners contended that section 132 of the Act violates articles 14 and 19 of the Constitution. Since these petitions succeed on the ground of abuse of power, it is not necessary to discuss the question of constitutionality of section 132.
Section 132 of the Act deals with powers of search and seizure. Section 132 states :
'132. (I) Subject to any rules made in this behalf, any Income-tax Officer specially authorised by the Commissioner in this behalf may, -
(i) enter and search any building or place where he has reason to believe that any books of account or other documents which in his opinion will be useful for, or relevant to, any proceeding under this Act, may be found, and examine them, if found;
(ii) seize any such books of account or other documents;
(iii) place marks of identification on any such books of account or other documents or make or cause to be made extract or copies therefrom;
(iv) make a note or an inventory of any articles or things found in the course of any search and this section which, in his opinion, will be useful for, or relevant to, any proceeding under this Act.
(2) The provisions of the Code of Criminal Procedure, 1898 (5 of 1898), relating to searches shall apply, so far as may be, to searches under this section.'
The Central Board of Revenue has framed Rules under the Act. Rule 112 deals with search and seizure. Rule 112 is in these terms :
'112. (I) The powers of search and seizure under section 132 shall be exercised in accordance with sub-rules (2) to (10).
(2) The Commissioner may, for reasons recorded, issue a written order under his own signature and bearing his seal, specially authorising any Income-tax Officer, subordinate to him, to enter any building, or place, to be specified therein, where he has reason to believe that books of accounts or other documents which, in his opinion, will be relevant to or useful for any proceedings under the Act may be found. Such order may authorise the Income-tax Officer to do all or any of the following acts, namely :-
(a) to enter the said building or place with such assistance of police officers as may be required;
(b) to search the same and to place identification marks on such books of account or other documents found therein as, in his opinion, will be relevant to or useful for any proceedings under the Act and to make a list of such books or documents with particulars of the identification marks thereon;
(c) to examine such books or documents and to make, or cause to be made, copies of or extract from such books or documents;
(d) to take possession of or seize any such books or documents;
(e) to make a note or an inventory of any articles of things found in the course of such search which, in his opinion, will be useful for or relevant to any proceedings under the Act;
(f) to convey such books or documents to the officer of the Income-tax Officer or any other authority not below the rank of an Income-tax Officer employed in the execution of the Act....................................
(10) The order of the Commissioner referred to in sub-rule (2) shall be in Form No. 45.'
Form No. 45 as contemplated by sub-rule (10) of rule 112 runs thus :
'Warrant of Authorization under section 132 of the Income-tax Act, 1961, and rule 112(10) of the Income-tax Rules, 1962 :
The Income-tax Officer............
Whereas information has been laid before me and on the consideration thereof I have been led to believe that certain books of account and/or documents which are or may be relevant to or useful for proceedings under the above Act in the case (name of assessee with G. I. R. No......) have been kept and are to be found at (specify particulars of the building or place).
This is to authorise and require you.......
(Name of the Income-tax Officer)
(a) to enter and search, with such assistance of police officers as may be required, said premises;
(b) to place identification marks on such books and documents as may be found in the course of the search and as you may consider relevant to or useful for the proceedings aforesaid and to make a list thereof together with particulars of the identification marks;
(c) to examine such books and/or documents and make, or cause to be made, copies or extracts from such books and documents;
(d) to seize such books of account and/or documents, and take possession thereof;
(e) to convey such books or documents to the office of the Income-tax Officer or any other authority not below the rank of an Income-tax Officer employed in the execution of the Act; and
(f) to exercise all other powers and duties under the said section and the rules relating thereto.
It will be seen that under section 132 and rule 112 different duties have been assigned to the Commissioner and the Income-tax Officer. The expression 'where he has reason to believe' appears in the fourth line of sub-rule (2) of rule 112. There was a good deal of discussion as to whether the pronoun 'he' refers to the Commissioner or the Income-tax Officer. It will be noticed that the first sentence of Form No. 45 contains a similar provision. Form No. 45 is signed and issued by the Commissioner. Form No. 45 opens thus :
'........... Whereas information has been laid before me and on the consideration thereof I have been led to believe....'
In this sentence the pronoun 'I' clearly refers to the Commissioner. It, therefore, appears that the pronoun 'he' in the phrase 'where he has reason to believe' in the fourth line of sub-rule (2) of rule 112 has also reference to the Commissioner. The second sentence in sub-rule (2) of rule 112 is :
'Such order may authorise the Income-tax Officer to do all or any of the following acts, namely :
(b) to search the same and to place identification marks on such books of account or other documents found therein as, in his opinion, will be relevant to or useful for any proceedings under the Act and to make a list of such books...........'
The expression 'in his opinion' appearing in clause (b) has reference to the Income-tax Officer.
The plan of the section 132, rule 112 and Form No. 45 appears to be this. Initially, the Commissioner receives certain information which makes it expedient to organize a search. When the Commissioner has reason to believe that relevant documents can be recovered by arranging a raid, he authorises an Income-tax Officer to make a search. When he is so authorised, the Income-tax Officer proceeds to search a building or place. During the search the Income-tax Officer can seize such documents as, in his opinion, would be useful for any proceedings under the Act. It will be seen that at different stages in the proceedings the Commissioner and the Income-tax Officer have to apply their mind to the problem of relevancy of documents for purposes of proceedings under the Act.
Up to 1961, the Indian Income-tax Act, 1922, was in force. The Income-tax Act, 1961, came into force on April 1, 1962. Assessment proceedings for Seth Brothers for three financial years 1960-61, 1961-62 and 1962-63 are pending before the Income-tax Officer concerned. It will be noticed that a part of this period was before April 1, 1962. Section 297 of the Income-tax Act, 1961, deals with repeals and savings. According to clause (a) of sub-section (2) of section 297 of the Act, 'where a return of income has been filed before the commencement of this Act by any person for any assessment year, proceedings for the assessment of that person for that year may be taken and continued as if this Act had not been passed.' In paragraph 38 of the counter-affidavit of respondent No. 4, it is stated that returns of income for the assessment year 1960-61, 1961-62 and 1962-63 were filed on July 8, 1960, June 30, 1961, and October 5, 1962, respectively. It will be seen that returns for two assessment year 1960-61 and 1961-62 were filed by Seth Brothers before the commencement of the Income-tax Act, 1961. Assessment of income-tax for those two years will have to be done under the provisions of the Indian Income-tax Act, 1922. It may not be possible to treat those assessment proceeding as under the 1961 Act. Assessment for the year 1962-63 will undoubtedly be a proceeding under the 1961 Act.
The first point that one notice about the impugned seizure proceedings is the enormous extent of the seizure. Annexures 'Z-1' to 'Z-19' to the petition in Writ No. 3302 of 1963 are lists of documents seized by respondents Nos. 3 and 4. After omitting ornaments, etc., we come across more than 500 entries relating to documents. Some of these entries are : 'one bundle loose papers', 'bundle of vouchers', etc. Each of such entries accounts for several documents seized by the respondents. So the total number of documents seized during the raid must considerably exceed 500.
Annexures 'D-1' and 'D-2' to the writ petition are copies of letters of authorization issued by the Commissioner of Income-tax. In those letters it was stated that the two Income-tax Officers could seize documents which would be useful in the proceedings in the case of Seth Brothers. But the documents seized by respondents Nos. 3 and 4 not only cover documents belonging to Seth Brothers, but also documents belonging to three other business concerns which are the petitioners in the other three cases. For justifying the seizure of documents belonging to those other concerns, it was contended for the respondent that all the four business concerns are closely associated with one another. There are three brothers, Prithwinath, Vishwanath and Baikunth Nath. Prithwinaths son is Man Mohan Nath. These four persons or most of them figures as partners, shareholders or directors in all the four business concerns. It, therefore, became necessary to seize documents belonging to the other three business concerns also.
It is true that the four business concerns are closely associated to one another. But the four concerns are being treated as four separate entities for income-tax purposes. The letters of authorization issued by respondent No. 1 made mention of the case of Seth Brothers only. Document belonging to other firms or companies could not be seized under that authority unless it can be shown that those documents are useful for the proceedings in the case of Seth Brothers.
On going through the lists of documents (annexures 'Z-a' to 'Z-19'), we come across several documents, the relevancy of which is questionable. Clause (e) of entry No. 6 of list No. 7 is : 'File containing vouchers for medicine.' Vouchers for medicine purchased by some partners can have little bearing on income-tax proceedings. Serial Nos. 30, 31 and 32 of list No. 9 relate to two cash books and one ledger belonging to Nath Brothers for the years 1958 and 1959. In the first place, the registers belonged to Nath Brothers, and not to Seth Brothers. Secondly, those registers are for a period prior to the assessment in hand. Serial No. 3 of list No. 10 is 'Advertisement file'. I do not see how an advertisement file can help an Income-tax Officer in an assessment proceeding. Item No. 11 of list No. 10 is : 'File, Temperature Report, Patna'. I do not under stand what bearing a temperature report can have on an assessment proceeding. Serial No. 53 of list No. 10 is : 'Patwari papers of Pabli'. In the first place, the respondent are not handling any proceeding for agricultural income-tax. Secondly, it is always possible for the respondents to obtain copies of village papers from the official concerned. It was hardly necessary to seize Patwari papers from the petitioners office. Item No. 62 of list No. 10 is : 'Three maps of Cold Storage'. If the authorities wish to ascertain the extent of business conducted at the Cold Storage, a local inspection would be the proper course. Maps by themselves can give the respondents little help in this matter. Serial No. 1 of list No. 12 is : 'A note in Hindi dated 6th August, 1961, regarding opinion for indemnity'. It is difficult to see how an opinion for indemnity can help the respondents in the assessment proceedings. Items No. 8 of list No. 12 is : 'Power of attorney in favour of Seth Prithvi Nath and Seth Baikunth Nath, Seth Vishwa Nath written by Seth Prithvi Nath and Dr. Man Mohan Nath....' Mr. Gulati, appearing for the department, was unable to explain the relevancy of this document.
In paragraph 56 of the petition it is stated :
'That it appears that the Deputy Director of Inspection... ordered a raid for search and seizure of all the account books and papers which could be found.'
A number of counter-affidavits have been filed by the respondents. There is one counter-affidavit by Sri A. L. Jha, who was then the Commissioner of Income-tax. His counter-affidavit contains no reference to paragraph 56 of the writ petition. Another counter-affidavit has been filed by Sri Agarwal, respondent No. 4. This counter-affidavit is much more detailed. In paragraph 19 of this counter-affidavit it is stated that the deponent has no knowledge of the averments contained in paragraph 56 of the writ petition. Another counter-affidavit has been filed by Sri Mitra, who is the Income-tax officer in charge of Special Investigation, Circle B, Meerut. This counter-affidavit contains no reference to paragraph 56 of the writ petition. A counter-affidavit has been filed by Sri Ramaswamy, who is the Deputy Director of Inspection (Investigation), New Delhi. In paragraph 6 of this counter-affidavit it is merely stated that paragraph 56 of the writ petition is vague. The deponent denied having ordered any raid or search. It will be seen that no one has expressly denied the allegation contained in paragraph 56 of the writ petition to the effect that there was an order for search and seizure of all account books and papers.
In paragraph 62 of the writ petition it is stated that the Income-tax Officers (respondents Nos. 3 and 4) were saying on the spot that they had directions to impound everything that they found for the purpose of investigation by the directorate. Respondent No. 3 in his counter-affidavit makes no reference to this charge. Paragraph 24 of the counter-affidavit of respondent No. 4 deals with paragraph 62 of the writ petition. But there also we do not find any denial of the charge that the Income-tax Officers had instructions to impound everything that they could find. In Writ No. 3380 of 1963 (Nath Brothers) it is stated in paragraph 33 that the Commissioner issued the order of authorisation on receiving a direction from the Direction of Investigation, Delhi. The Commissioner did not file any counter-affidavit in this case.
On 29th May, 1963, Sri A. L. Jha, Commissioner of Income-tax, drew up the following note :
'Sri R. R. Agarwal, I. T. O., D-Ward, Meerut, in his reports dated 28th May, 1963, requests for authorisation under section 132 of the I. T. Act, 1961, to enter and search the premises of M/s. Seth Brothers (G. I. R. No. 137-S/D.) and those of Seth Baikunth Nath Seth (G. I. R. No. 45-B/D.) of Shanti Niketan, Civil Lines, Meerut. On the facts stated in I. T. O.S reports, I am satisfied about the need for issue of the authorisation under section 132 of the I. T. Act, 1961.
Warrants of authorisation are therefore issued to the following Income-tax Officers in respect of the premises specified in the warrants :
1. Shri R. R. Agarwal, I. T. O., D-Ward, Meerut.'
2. Shri R. Kapur, I. T. O., Spl. Inv. Circle A, Meerut.'
The two letters of authorisation (annexures 'W-A' and 'W-2') were drawn up in Form No. 45. Annexure 'W-A' ran thus :-
'... I have been led to believe that certain books of account and/or documents which are or may be relevant to or useful for proceedings under the above Act in the case of Seth Brothers, G. I. R. No. 137-S, have been kept and are to be found at Shanti Niketan.. . This is to authorize and require you...'
It will be seen that none of these documents drawn up by the Commissioner of Income-tax gives details of the documents that were to be seized. All that was stated in these orders was that documents useful for proceedings under the Act in the case of Seth Brothers could be seized.
According to sub-section (2) of section 132 of the Act, the provisions of the Code of Criminal Procedure, 1898, relating to searches shall apply, so far as may be, to searches under this section. It will, therefore, be useful to examine the provisions of the Code of Criminal Procedure (hereinafter referred to as the Code) relating to searches.
Chapter VII of the Code deals with searches and allied matters. Under section 94,Criminal Procedure Code, a court may summon a document or thing. Section 96, Criminal Procedure Code, provides for the issue of a search warrant. Section 96, Criminal Procedure Code, states :
'(1) Where any court has reason to believe that a person to whom a summons or order under section 94....... has been or might be addressed, will not or would not produce the document or thing... it may issue a search warrant....'
Section 98, Criminal Procedure Code, provides for search of a house. Section 98, Criminal Procedure Code, states :
'If a District Magistrate..... has reason to believe that any place is used... for the deposit of forged documents...... he may by his warrant authorize any police office above the rank of a constable -
(a) to enter, with such assistance as may be requited, such place; and
(b) to search the same in the manner specified in the warrant; and
(c) to take possession of any property, documents.......'
Section 165, Criminal Procedure Code, provides for search by a police officer. Section 165, Criminal Procedure Code, states :
'(1) Whenever an officer in charge of a police station.... has reasonable grounds for believing that anything necessary for the purposes of an investigation may be found in any place...... such officer may, after recording in writing the grounds of his belief and specifying in such writing, so far as possible, the thing for which search is to be made, search, or cause search to be made, for such thing in any place.....'
It will be seen that, under this section, a police officer has to specify in writing the thing for which a search is going to be made.
It may be that sections 96 and 98, Criminal Procedure Code, do not, in terms, apply to a search under section 132 of the Act. But the reference to the Code of Criminal Procedure in sub-section (2) of section 132 of the Act is an indication that, in conducting searches under section 132 of the Act, and Income-tax Officer ought to proceed on the lines of sections 96, 98 and 165, Criminal Procedure Code. Section 132 of the Act does not contemplate a fishing inquiry. Before starting a search the Commissioner and the Income-tax Office though to have a fairly clear idea as to which documents have to be seized from a certain place.
In paragraph 80 of the writ petition it is stated that the petitioner had never in the past refused to produce any account book required by the department. On this point, it is stated in paragraph 42 of the counter-affidavit of respondent No. 9 that it was the belief of department that real books of account and documents revealing the true state of affairs were never produced by the petitioner, and that the books produced by them for certain years were false account books. It may be that the authorities were not satisfied with the returns submitted by the petitioner. But it has not been shown that the petitioner had ever refused to produce any document summoned from it under section 131 of the Act (or the corresponding provision under the old Act).
Police officers accompanied the Income-tax Officers during the raid. According to the counter-affidavit of Satyapal Tyagi, Sub-Inspector, the police party consisted of a Sub-Inspector, two head constables and nine constables. None of them belonged to armed police. They did not carry fire-arms during the search. Two constable were sent away after an hour. The other members of the police party withdrew at 5 p.m. on 7th June, 1963. No policeman was present during the search on 8th June, 1963. It will be seen that the police party accompanying the Income-tax Officers consisted of 12 officials in all. It may be that the strength of the police party was fixed by the Superintendent of Police, Meerut. But he must have consulted the Income-tax Officers in this matter. There is no indication that the partners of the firm were likely to resort to violence, or that any member was a previous convict. The strength of the police party appears excessive.
The property examined by the Income-tax Officers included several ornaments. Inventories of these ornaments were prepared. It is true that the ornaments were not taken away by the Income-tax Officers. But the question remains whether it was at all necessary to prepare a list of ornaments. According to clause (e) of sub-rule (2) of rule 112, the Income-tax Officer is authorised 'to make a note or an inventory of any article or things found in the course of such search which, in his opinion, will be useful for or relevant to any proceedings under the Act.' Under clause (e), it is permissible to prepare an inventory of articles or things other than documents. In a special case it may become necessary to prepare an inventory of ornaments during a search. But such cases would be rare. It has not been shown that in the present case an inventory of ornaments was useful for a proceeding under the Act. To prepare an inventory of ornaments can cause unnecessary inconvenience and embarrassment to the owner.
In paragraph 62 of the writ petition it was stated that the Income-tax Officers did not place any mark of identification on the documents seized by them. On this point, it is stated in paragraph 24 of the counter-affidavit of respondent No. 4 that identification marks were placed on some books and documents wherever it was thought necessary. The respondents thus concede that identification marks were not placed on all the documents, which were seized during the search. According to annexures W-1 and W-2, respondents Nos. 3 and 4 were required by the Commissioner 'to place identification marks on such books and documents as may be found in the course of the search...' According to those instructions, identification marks ought to have been placed on all the documents that were seized by the respondents. That instruction was partly ignored.
The documents in question were seized on 7th and 8th of June, 1963. The present writ petitions were moved in this court on 22nd August, 1963. The documents remained in the custody of the respondents till then. On this point, it is stated in paragraph 30 of the counter-affidavit of respondent No. 5 :
'.....it was the intention of the department to return to the petitioners their current books of account after scrutiny as early as possible on priority basis, but the petitioners are themselves responsible for thwarting this effort of the department first by putting their own seals on some of the books and documents at the time of search and thereafter by not books for the purpose of scrutiny on 13th August, 1963, on which date it was proposed to open and arrange the books.'
On this point, it is stated in paragraph 64 of the rejoinder affidavit No. 1 :
'.........It is not correct to say that the petitioners put their seals on books or documents. The request for opening the books was made as late as in the middle of August only.'
It may be that some of the documents seized by the respondents were sealed up by the petitioner. But the respondents have not suggested that all the documents were thus sealed up by the petitioner. Admittedly, several documents were available for inspection and scrutiny. It was not till 13th August, 1963, that the petitioner was called upon to open up the books. The documents seized from the petitioner included several current books of account. Detention of these books of account for over two months must have seriously prejudiced the various petitioners in their business activities.
A similar case came up before a Full Bench of the Assam High Court in Senairam Doongarmal Agency (P.) Ltd. v. K. E. Johnson. The court unanimously held that the search was mala fide.
According to the petitioner, Satya Prakash, respondent No. 7, had enmity with the petitioner. He persuaded respondent No. 9 to assess the petitioner to income-tax highly. It is at the instance of respondent No. 9 that the search was organized. Respondent No. 9 stated in paragraph 29 of the counter-affidavit that he did not know Satya Prakash at all. There was no extraneous consideration. Assessment orders were passed on merits. Letters of authorisation were issued by the Commissioner of Income-tax Search was conducted by respondents Nos. 3 and 4. There is no allegation of enmity against respondents Nos. 1, 3 and 4.
In Partap Singh v. State of Punjab, it was observed on page 83 :
'Doubtless, he who seeks to invalidate or nullify any act or order must establish the charge of bad faith, an abuse or a misuse by Government of its powers.'
That observation shows that it is possible to invalidate a certain action by a Government officer without establishing enmity between the petitioner and the Government officer. Abuse of power may suffice to invalidate or nullify an act.
The search and the seizure in this case leave no room for doubt that the Income-tax Officer did not at all apply his mind and formed no opinion regarding the relevancy or usefulness of the account books and documents for any proceedings under the Income-tax Act of 1961. Many documents were not examined or even looked into. It is no excuse for the non-observance of the requirements of law that the number of books and documents was very large, and their examination would have taken considerable time. The correctness or otherwise of the opinion actually formed is not subject to enquiry. But if it is obvious that no opinion was in fact formed, the search and the seizure must be held as having been in excess of the powers conferred upon the Income-tax Officer.
On examining the circumstances under which the search was conducted in the present case, we not the following points :
(a) There is reason to believe that there were instructions from the Directorate of Inspection, New Delhi, for a general raid and seizure of all account books and papers which could be found at the petitioners premises.
(b) More than 500 documents were seized from the premises.
(c) Some of the documents seized by the respondents appear to be irrelevant for the purpose of any proceeding under the Act.
(d) Besides documents belonging to Seth Brothers (G. I. R. No. 137-S), the Income-tax Officers seized documents belonging to another firm and two companies.
(e) Marks of identification were not put on several documents.
(f) The documents seized on 7th and 8th of June, 1963, were detained by the respondents for more than two months before the writ petitions were field in this court.
(g) The police force employed during the raid was excessive.
In view of all these circumstances, the search does not appear to be bona fide. It is true that there was no ill will between the four petitioners on one side and respondents Nos. 1, 3 and 4 on the other side. But the extent of the seizure was far beyond the limits of section 132 of the Act. The action was mala fide in the sense that there was abuse of power conferred on the Income-tax Officers by section 132 of the Act. The Act being mala fide, the proceedings should be quashed by this court by issuing a writ of mandamus.
The letters of authorization dated 29th May, 1963, were issued by Sri A. L. Jha, who was then the Commissioner of Income-tax, U. P. He died in December last. It will be open to the new Income-tax Commissioner to initiate a fresh proceeding under section 132 of the Act, if he is so advised. In case another letter of authorization is issued under section 132 of the Act, the Income-tax Officer will have to conduct the search in accordance with law as explained in this judgment.
In my opinion, the four connected petitions should be allowed with costs. And the respondents should be directed to return the documents to the petitioners.